Structure of national income, Microeconomics

STRUCTURE OF NATIONAL INCOME:

The structure or composition of national income of an economy explains the relative significance of the different producing sectors in an economy. When a country is in a state of underdevelopment, primary sector (agriculture and allied occupations) makes the largest contribution to the national income. As the country grows and gets developed, the contribution of the industrial and services sectors gradually increases. Therefore, on the basis of the composition of GDP, one can easily pronounce whether a country is developed or underdeveloped.

Let us examine what has happened in India. In India, over the period 1951-2005, the share of the primary sector in national income has fallen by about 40 per cent while that of the secondary and tertiary sectors has increased. This trend is projected to accelerate further in wake of liberalisation of the economy. This may happen primarily because of the following factors:

Reduced restrictions on involvement of private sector in areas like software development and information services;